AM Best Affirms Credit Ratings of Ohio National Financial Services, Inc. and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) of The Ohio National Life Insurance Company (ONLIC) and its wholly owned subsidiary, Ohio National Life Assurance Corporation (together referred to as Ohio National Life Group). These companies are the principal insurance subsidiaries of Ohio National Financial Services, Inc. (ONFS), which is an intermediate holding company wholly owned by Constellation Insurance, LP (Constellation). Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of National Security Life and Annuity Company (NSLAC). Additionally, AM Best has affirmed the Long-Term ICR of “bbb+” (Good) and all Long-Term Issue Credit Ratings (Long-Term IRs) of ONFS. The outlook of these Credit Ratings (ratings) is stable. All companies are headquartered in Cincinnati, OH. (See below for a detailed listing of the Long-Term IRs.)

The ratings reflect Ohio National Life Group’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The balance sheet strength is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and is supportive of the stable outlooks. AM Best acknowledges the challenges Ohio National Life Group faces to grow its business organically in its core life and annuities market. However, the recent ownership change by which Constellation acquired Ohio National Mutual Holdings through a demutualization process, effective March 31, 2022, is expected to provide ONLIC with more financial flexibility. Constellation has committed an additional $500 million in capital support over the next four years to support Ohio National Life Group’s current life and annuity liabilities and the maintenance of its strongest level of risk-adjusted capitalization, targeting risk-based capital in the 400% company action level range. Additionally, Constellation has approximately $1 billion of capital to acquire and build its business inorganically.

Ohio National Life Group has been active in the reinsurance markets, completing a whole life block transaction to free up capital and improve its risk-adjusted capital position higher than the 630% risk-based capital level at year-end 2021. AM Best views this as a positive in the rating assessment; however, there is some offset to this favorability through its elevated usage of affiliated reinsurance captives and lack of top-line revenue growth over the medium term. The capital has been augmented through its use of surplus notes and debt held at ONFS, which has a modest level of financial leverage. AM Best acknowledges that there are opportunities to grow the businesses through the leadership of Constellation, and any scale through acquired business should produce improved operating costs in the long term.

The ratings of NSLAC reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, very limited business profile and appropriate ERM. The ratings reflect the financial strength and support of parent Ohio National Life Group. The company has managed its business risk of the run-off variable annuity block well; however, this has been done through reinsurance. The subsidiary remains well-capitalized and maintains ample liquidity to manage the company’s financial obligations.

The following Long-Term IRs have been affirmed with stable outlooks:

Ohio National Financial Services, Inc.—

-- “bbb+” (Good) on $425 million 5.55% senior unsecured notes, due January 2030

-- “bbb+” (Good) on $250 million 6.625% senior unsecured notes, due May 2031

The Ohio National Life Insurance Company—

-- “a-” (Excellent) on $50 million 8.50% surplus notes, due May 2026

-- “a-” (Excellent) on $250 million 6.875% surplus notes, due June 2042

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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